Cryptocurrency is widely celebrated for its decentralized nature and transparency due to its on-chain transactions. Yet, its openness has become a loophole for nefarious exploits. Such is the case of the sophisticated pig-butchering scam tied to fraudulent transfers worth $225 million. The case involved the popular cryptocurrency exchange Coinbase, Tether, and the United States Federal Agents.
Coinbase, on Tuesday, revealed that it assisted the U.S. Secret Service in tracing and seizing $225 million in “stolen crypto” tied to a 2023 pig-butchering scam. The United States Secret Service, Federal Bureau of Investigation (FBI), and the Attorney’s Office filed an order to seize about $225 million in crypto linked to alleged fraudulent transfers last week. The funds, including USDT frozen by Tether last December, were traced on-chain back to Coinbase-linked addresses.
What Happened
Scammers have operated large-scale pig-butchering schemes since 2023, enticing victims with fake romance and investment opportunities. These violators would then coerce their victims into transferring funds through blackmail or by keeping them in captivity. Tether said it froze 39 wallets with $225 million worth of illicit USDT. The Secret Service and the FBI coordinated forensics to track these on-chain movements and identify the victims, of which over 130 of them were Coinbase users.
Coinbase said it played a critical role in the seizure tied to the pig-butchering scam by conducting a multi-day effort to trace millions in cryptocurrency transactions linked to illicit wallets. It also helped identify victims, which lost a combined $2.3 million, eligible for restitution. Last week, the United States Federal Agents formally seized the funds and are now redistributing them to verified victims. Special Agent in Charge of the case Shawn Bradstreet said the seizure marked the agency’s largest crypto seizure to date.
Tether, which has had issues related to transparency related to USDT issuance, was quick to jump into the celebratory mood. The world’s largest stablecoin issuer said in a statement that its action reflects the firm’s broader effort to lead a fully-compliant and transparent digital asset industry. Tether would later burn the frozen tokens and reissued equivalent USDT to a secret wallet linked to the United States Secret Service.
The Implications of the Seizure
The seizure was a combined effort of two leading crypto companies Coinbase and Tether, alongside the Secret Service. This establishes the fact that cooperation between the government and exchanges can produce meaningful results, such as the $225 million pig-butchering case. Also, Coinbase’s disclosure indicates that exchanges can work with law enforcement to proactively safeguard users.
Although Tether has been questioned for its lack of transparency, the burning and reissuing of USDT on the public chain shows its true commitment to accountability and responsibility. Both Tether and Coinbase’s rapid response shows how crypto companies can act as a guidance against fraud. It shows that stablecoin issuers can also play a critical role in security infrastructure. Therefore, law enforcement will see these companies not just as financial entities but as gatekeepers against illicit transactions.
More Seizures Expected?
Pig butchering scams have risen 40%. The industry faces an uphill task in curbing this rising tide of sophisticated crime. However, more coordinated efforts can combat this growing threat and foster more trust. Regulators may also introduce clearer guidelines on anti-fraud and oversight, and could empower exchanges to be watchdogs, as first responders. That way, crypto can be clean, transparent, and crime-free.